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A progress share could be all the fad one minute, then abruptly discover itself out of favour. That’s what has occurred over the previous 12 months with Greggs (LSE:GRG). The inventory has carried out nicely lately, however fell by 40% throughout 2025. This places the FTSE 250 firm in an attention-grabbing place as we begin 2026, with traders mulling over whether or not to purchase the dip.
How we received right here
One issue within the fall final 12 months was decrease progress. It’s vital to make a distinction right here between Greggs nonetheless rising income however simply at a slower tempo. For instance, within the newest buying and selling replace from October, income was up 6.7% year-to-date. Some may assume this isn’t too unhealthy. But if we take a look at the identical report from the earlier 12 months, income was up 12.7%. Double-digit proportion positive aspects relative to prior reporting years at the moment are anticipated for a lot of traders. So although Greggs remains to be rising, some really feel dissatisfied that issues are slowing down.
One more reason for the share worth fall got here as a part of a sector-wide challenge. Broader client shares struggled amid cost-of-living issues. Buyers turned extra cautious about UK retail and food-on-the-go names, given the low UK financial progress and future prospects.
Causes to think about shopping for
The worth-to-earnings (P/E) ratio has fallen, given the share worth’s stoop relative to the newest earnings per share. To place this into context, a 12 months in the past, the P/E ratio was round 20. Now it’s at 11.15. In my eyes, the inventory does look undervalued on that metric. Keep in mind that the FTSE 250 common P/E ratio is 13.3. Given Greggs is a progress identify, I’d anticipate the ratio to be above the common.
Administration remains to be concentrating on vital net-new retailer openings in 2026. Within the newest replace, it spoke of “a strong pipeline for Q4 and into 2026”, which ought to help long-term gross sales progress as soon as the strain on like-for-like gross sales eases. It’s a confirmed enterprise mannequin for achievement, in that continued enlargement into high-traffic areas drives each quantity and income progress.
Additional, the corporate is constant to diversify threat through direct gross sales in supermarkets. The vary is now out there in 930 Iceland and 820 Tesco shops throughout the UK, with extra deliberate. As this space of the enterprise continues to develop, it supplies a buffer when different divisions don’t carry out as nicely.
Needing to be cautious
The general slowdown in progress is an ongoing threat for traders to observe. Nevertheless, I feel the autumn within the share worth has taken issues to the opposite excessive. Given the present valuation, it’s virtually as if folks anticipate Greggs to start out declining in income. I simply can’t see this taking place.
The corporate remains to be in a progress mode, however the tempo will naturally gradual because it matures. However profitability stays intact, which is a elementary purpose I feel traders might contemplate shopping for the dip.
